ABCs of sales

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ABC television network President Alex Wallau has a pugilistic background. So one enters his office immediately looking for a boxing metaphor.

"Where are the boxing gloves?" asked a reporter.

"There are no gloves," said Mr. Wallau, who, before he assumed the top spot at ABC, was, and continues to be, ABC Sports, on-air boxing analyst. "But I have an award given to me by the Boxing Writers Association that I'm very proud of," he said, gesturing to a silver microphone award on his bookshelf.

Gloves or not, the boxing association is entirely relevant for Mr. Wallau and ABC this year. In the advertising world, the network experienced a real brawl during his first year in the top spot at ABC-a traumatic fight for advertising dollars during this year's upfront marketplace. ABC took it on the chin, falling to some $1.6 billion in upfront sales, according to executives, the largest year-to-year drop among network contenders in this season's upfront. That's a huge reversal from last year, when ABC's take was $2.3 billion, the most ever for a network during an upfront selling period.

ABC wasn't alone; all broadcast networks witnessed a weak market where cost per thousand viewers slipped as much as 9% vs. the year before. It was the first time broadcast networks have seen a price decline in a decade.

far to fall

"We were so high, we had further to fall," said Mr. Wallau. "We were coming off the biggest network upfront that any network had in the history of television. Networks with a lower base didn't have that [far] to fall."

While ABC did indeed sink in the upfront, it still did well, especially in comparison to Viacom's CBS. Although CBS had a stellar year due to "Survivor" and "C.S.I: Crime Scene Investigation," it only grabbed $1.4 billion in sales, according to media executives estimates. That's a plus for ABC.

"Given where CBS is, you would have expected them to be higher, and they are not-that's a good sign for ABC," said Stacey Shepatin, senior VP-director of national broadcast, Interpublic Group of Cos.' Hill, Holliday, Connors, Cosmopulos, Boston. "You've got CBS below ABC in terms of dollars. Still, nobody did great."

Advertisers had their reasons to rough up ABC. In past years, when the market was robust, media agency executives said the network was a bully in its sales approach with a take-it-or-leave-it attitude. This year, ABC felt the brunt of the weak market. Taking a major hit in its key adults 18 to 49 ratings, ABC lost 20% this year from last year, delivering a Nielsen 4.4 rating and 12 share. It dropped 12% in total viewers to 12.51 million, placing the network second to CBS.

The lower 18 to 49 showing was clearly due to an increasing older audience of its star show "Who Wants To Be a Millionaire," which had become, through its four hour-long programs per week, the network's mothership. This coming season, "Millionaire" is cut to twice a week, which should make a difference with the demographic and bring down the rising age profile of its audience. "Average age of a viewer is a bizarre statistic which got the fascination of the media," said Mr. Wallau. "Nobody buys off the average age of a viewer. We are going to go down a lot just by having two `Millionaires.' Without `Millionaire' we are younger than NBC."

ABC will need to play catch-up, hoping at least two new shows catch on this year, especially comedies. One veteran media buyer said the network's top sitcoms, such as "The Drew Carey Show," are slowing down. The executive adds reliance on "Millionaire" set ABC back somewhat in developing new shows.

ABC's future advertising push will no doubt come from Mr. Wallau's vision of cross-media platform deals-one involving ABC and its parent Walt Disney Co., under the ABC Unlimited banner. In the near term, Mr. Wallau believes cross-media advertising deals will account for a "single-digit" percentage of ABC's entire advertising take.

smart deals

ABC Unlimited, launched last year, snared a $30 million deal with Toys `R' Us, spanning Disney properties including theatrical movies, and Disney publications Disney Adventures, Family Fun and Disney Magazine.

While these deals are not the biggest in terms of other recent cross-platform pacts from Viacom Plus and News Corp. One, advertising executives believe they are smart, because the ABC/Disney deals do not simply bundle TV platforms such as network, syndication, and cable. Some cross-platform agreements focus only on TV commercial inventory and are driven by a lower pricing. "If you look at the other deals-in the ones that have gotten the attention that I know about-there have been discounts, volume discount deals," said Mr. Wallau. "We don't want to be in that business."

ABC Unlimited deals, ad executives said, encompass a truly diverse group of media properties, giving greater value for advertisers and a higher price for ABC. "They are smart, they have the breadth of assets, and they don't force their cross-media deals as much as others, who are heavy-handed-specifically AOL Time Warner and Viacom Plus," said one media executive who asked not to be identified.

To Mr. Wallau, this is only a start. "I believe in this kind of marketing partnership relationship, as opposed to a negotiated commodity relationship. The marketing partnership is the only way we are going to survive. The thing that will pop the marketing partnership in a big way is interactive."

Digital set top boxes are the key to the future, he said. "Interactivity will allow us to give advertisers significant value. A lot of discussion is years away, including discussions with [multiple system operators]. This is the precursor for it. This is how we get big ideas."

Escalating program pricing in a world of diminishing network ratings is also forcing networks to consider dual-platform program deals, where a second airing of a network show can run on its sister cable network within a week of its network debut. With the acquisition of Fox Family Channel, to be called ABC Family, Disney is already looking to take advantage of the phenomenon. Will ABC, for instance, package similar programs from ABC and ABC Family to advertisers? "We are working on it," said Mr. Wallau.

Looking forward, Mr. Wallau believes the long, tiring bout for increased advertiser budgets will continue for the rest of the year, and better days are perhaps a year away.

"The fourth quarter will be a tough environment-no question," he said. "In the first quarter of '02, things are going to get firmer. The second half of the year ['o2] is an opportunity for us."

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